Impact of COVID-19 pandemic slows economic growth

The COVID-19 pandemic has inflicted a heavy impact on local businesses

When the COVID-19 pandemic initially broke out at the beginning of the year, it served to negatively impact the Vietnamese economy and hamper its growth momentum. Many economists stated that in order to continue the process of reviving the local economy, it is imperative to enhance internal capacity whilst renewing the growth model towards achieving sustainable development.

It is therefore necessary to continue boosting additional institutional reforms, cutting costs due to policies, and creating additional economic space, thereby driving forward businesses.

The COVID-19 pandemic has served to slow down the growth momentum, with local firms enduring the brunt of the impact, despite contributing more than 60% to GDP annually.

Pham Dinh Thuy, director of the Department of Industrial Statistics under the General Statistics Office, noted an online survey conducted among over 156,000 enterprises nationwide in the middle of September which suggests larger enterprises have suffered more from the impact of the pandemic.

Most notably, 86% of major firms affected by COVID-19 account have been severely impacted, in addition to 82.6% of microenterprises. Indeed, larger businesses have greater links to value chains both domestically and globally, hence the impact from the pandemic is greater for them. Currently firms operating in the service sector are most affected by the pandemic, namely aviation and tourism.

Economic experts believe despite the country initially succeeding in controlling the spread of COVID-19, the local economy is facing up to potential risks in relation to the efficiency of public investment, including an increase in bad debt among the banking industry coupled with challenges in ensuring social security. These issues therefore require greater attention to reform, especially through proactive sustainable development and effective integration, they emphasised.

Tran Thi Hong Minh, director of Central Institute for Economic Management (CIEM), said, "The approach and the priority for reform must also adapt to the new context. The basic requirement is to continue improving the productivity and competitiveness of the national economy, and businesses. In particular, reform should be further promoted to accelerate digital transformation and implement the agenda regarding sustainable development in order to create more motivation for economic development in the coming time.”

According to economist Vo Tri Thanh, moving forward domestic companies must pay close attention to the issue of "green consumption" and strive to produce high-quality products in the post-COVID-19 landscape.

Thanh underlined the need for businesses to make the most of comparative advantages in terms of labour costs, transportation, connection and information processing services, all while adapting themselves to Industry 4.0 technology, coupled with digital transformation.

Along with maintaining epidemic prevention and control measures, the State must continue to reform in line with new trends whilst capitalising on opportunities from various free trade agreements signed by the nation, as well as shifting waves of investment.

Furthermore, experts also emphasised that improving labour productivity remains one of the first requirements for sustainable development. Therefore, the development of the digital economy will certainly be one of the driving factors behind productivity growth moving forward. In addition, automation and digitisation will gradually replace many stages in terms of the production process of many economic sectors as a means of reducing costs, increasing profits, and using less labour.